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Idaho's economy is doing better than most during the pandemic. Here's why

Idaho Statesman - 11/8/2020

Nov. 8--Idaho leads all 50 states for economic momentum, credit worthiness and growth in personal income, and has an unemployment rate better than 47 other states.

While many states expect multibillion-dollar budget shortfalls because of the coronavirus pandemic, Idaho recently announced a $537 million budget surplus.

"Idaho's economy is doing phenomenally well compared to other states right now," Idaho Gov. Brad Little said last week at his address to the business community of the Boise Metro Chamber of Commerce. "And we hope that holds."

How has Idaho weathered the pandemic so much better than other states?

The answer lies in a combination of some fortuitous -- and some deliberate -- factors that put Idaho in a sweet spot to fare better than most through the pandemic.

Idaho's top industries

The first place to look is at some of Idaho's leading industries, such as construction, agriculture and food manufacturing.

"Our industry impacts have been relatively low," Karl Geisler, associate professor of economics at Idaho State University, told me in a phone interview recently. "So if you look at the governor's original stay-at-home order, there were exemptions for most of our large (gross state product) industries."

Food manufacturing, for example, was exempt. While durable goods manufacturing slowed nationwide, negatively affecting many other states, Idaho has a balance of durable-goods manufacturing and nondurable, such as food manufacturing.

Together, agriculture and food processing generate 28% of Idaho's total economic output in sales and 13% of gross domestic product, according to the Idaho State Department of Agriculture.

Construction is another big player. Declaring construction an essential business that could continue operating played a big role in weathering the storm, according to Derek Santos, chief economist for the Idaho Division of Financial Management.

Housing starts continued strong even into the pandemic months, Santos wrote in an email to me. That likely insulated parts of Idaho's economy from the shock of the pandemic, both through consumer confidence and continued consumer spending that construction workers were likely able to continue, Santos wrote.

That plays into another key driver of Idaho's economy -- new residents, according to Peter Crabb, professor of finance and economics at Northwest Nazarene University in Nampa.

"The fact that we still have a net in-flow of people, particularly in the Treasure Valley, but also in eastern Idaho," Crabb told me in a recent phone interview. "So the extent to which people are moving from California and Utah and Nevada to Idaho is still large, and that's still impacting housing prices, and we see that all the time. So there has to be at least a marginal effect from that continuing migration to keeping the economy strong."

Delayed pandemic in Idaho

Next, Santos points out that the pandemic hit Idaho a little later than other parts of the country, with the notable exception of Blaine County.

That late start allowed Idaho, in both the public and private sectors, to prepare, to secure personal protective equipment and to learn from others' experiences in dealing with the pandemic.

For example, Crabb said, the Sorrento Lactalis cheese factory in Nampa was able "to reconfigure itself, so that it can sell cheese to the grocery stores and not to the restaurants."

Sectors hit hard had less impact on Idaho economy

What about all those other jobs that were lost during the pandemic? At one point, Idaho had as many as 104,000 claims for unemployment. Didn't that put a huge dent in Idaho's economy?

As it turns out, some sectors had high job losses but had less impact on the overall economy.

Geisler said that a lot of Idaho's higher-wage jobs were able to continue, as many office-type workers were able to transition to working from home.

Jobs that got hit the worst were arts and entertainment, recreation, food service and accommodation. Those jobs, while high in number, do not necessarily contribute as much to Idaho's gross state product, Geisler said.

Food service and accommodation as an industry, for example, has a high employment number, but that industry starts to fall down the ladder in terms of its impact on the economy.

"In terms of employment, the accommodation and food service industry is third out of the 19 high-level industry categories," Geisler said. "So in terms of employment, it's incredibly important."

However, "In terms of the wages paid, it is nine out of 19, so they're definitely low-paying jobs," Geisler said. "And in terms of its contribution to our gross state product, it's 11 out of 19."

Federal relief money helped Idaho

Not to be overlooked -- or underestimated -- is the $1.25 billionIdaho received from the federal government in coronavirus relief money.

Idaho's $1.25 billion payday represents about 16% of Idaho's total $7.944 billion budget. By comparison, the state of Nevada also received $1.25 billion in relief money, but that's only 5% of its $26.4 billion budget.

So the federal stimulus payment is going to have a bigger impact on Idaho's recovery efforts.

Santos said Idaho used coronavirus relief money early on for such things as personal protective equipment for small businesses, grants to small businesses and sole proprietors, and other efforts to stabilize the economy, minimizing the negative direct effects of the coronavirus.

"It is reasonable to think these efforts have helped with consumer confidence and aided Idaho's recovery," Santos wrote.

Idaho not as reliant on energy production

Here's yet another sweet spot for Idaho's economy.

Energy-producing states, such as Wyoming and New Mexico, are suffering from lower prices due to the slump in demand. Wyoming, reliant on coal, is expecting a $236 million reduction in state revenues. New Mexico, reliant on oil and gas, is looking at a possible $2 billion drop. Alaska has an $882 million decline, according to the Center on Budget and Policy Priorities.

Idaho's oil and gas industry is much smaller than, for example, the paper products industry.

Remember the Great Toilet Paper Shortage of 2020? Idaho actually benefited from a surge in demand for lumber and paper products, according to Santos.

Idaho's leisure and hospitality industry

Idaho's leisure and hospitality industry was hurt by travel restrictions, but the industry is a much, much smaller portion of the state's overall economy than many other states, such as Hawaii and Nevada, Santos said.

Even there again, Idaho benefited, according to Crabb.

Tourists flocking to Hawaiian beaches or the Vegas strip came to a standstill during the pandemic, but Idaho's typical tourism activities, such as fly fishing in the Wood River Valley or backpacking in the backcountry, which are more spread out and socially distanced, were still able to continue to some extent, Crabb said.

Idaho was strong to begin with

Finally, Idaho was at an advantageous economic situation prior to the pandemic. For example, the unemployment rate in late winter of less than 3% was well below the 4% traditionally considered full employment.

"After an initial spike (in unemployment) this spring, the unemployment rate has been dropping and the labor force has been growing," Santos wrote. "Even if the magnitude of the shock for the state were comparable to other states, Idaho would then emerge at a relatively advantageous situation, much like an individual with a larger bank account balance can better weather an unexpected bill than one with a lesser balance."

Scott McIntosh is the opinion editor of the Idaho Statesman. You can email him at smcintosh@idahostatesman.com or call him at 208-377-6202. Follow him on Twitter @ScottMcIntosh12.

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